A CBS poll of Americans just last month found that 56% of voters believe marijuana use should be legal. Instead of investing in volatile and illiquid OTC-traded marijuana stocks, consider creative alternatives GW Pharmaceuticals PLC- ADR (GWPH), 22nd Century Group Inc (XXII) and Altria Group Inc (MO).
G.W. Pharmaceuticals (GWPH)
Wall Street typically shuns most of the OTC-listed marijuana stocks. But GWPH is actually covered by several major firms, including Morgan Stanley, Leerink Partners and ROTH Capital.
Instead of focusing on growing and selling marijuana, GWPH is exploring potential medicinal applications of marijuana. GWPH’s lead drug, Sativex, is already approved to treat spasticity due to multiple sclerosis in 27 countries around the world. Sativex is also currently in Phase III trials for use to treat advanced cancer pain.
In March, GWPH reported positive Phase III data on another drug, Epidiolex, which is being tested for treatment of Davet syndrome associated with childhood epilepsy.
GWPH trades on the Nasdaq exchange and has a robust pipeline of drug candidates. Best of all, GWPH investors can profit off of the power of marijuana without relying on federal laws to change.
While most OTC-listed marijuana stocks have been tanking, GWPH stock is up 34% in 2016.
22nd Century Group (XXII)
GWPH may not care whether or not marijuana is legalized. However, one stock that is in prime position to capitalize on legalized weed is XXII. Like GWPH, XXII is not one of the typical marajuana stocks. XXII is a biotechnology company that develops plant-growing technology and processes. XXII’s technology allows tobacco and marijuana growers to manipulate the levels of nicotine and cannabinoids in their respective crops. In other words, XXII can genetically engineer tobacco and cannabis plants to alter their chemical potency.
In fact, the company’s commercially-available MAGIC cigarettes yield approximately 95% less nicotine than cigarettes previously marketed in the U.S. as “light” cigarettes.
The company already has a licensing agreement with British American Tobacco (BTI), the world’s second-largest tobacco company, to help reduce the harm caused by smoking.
If the U.S. government legalizes pot, there will likely be strict rules about the strength and content of the marijuana sold. The weed industry could really benefit from XXII’s technology.
Altria Group (MO)
Why would the world’s largest tobacco company be poised to benefit from weed legalization? It’s the same reason why General Motors (GM) will likely benefit from the auto industry’s transition to electric vehicles. As soon as the public decided it wanted electric vehicles, GM simply started making electric vehicles.
As soon as marijuana is legalized in the U.S., it’s likely that MO will start selling weed products. For these large companies, the critical production and marketing infrastructure is already in place. All they have to do is transition from one product to another. That’s a huge advantage over smaller marijuana stocks that will be starting from scratch. If weed is legalized, it’s likely that MO will snatch up the marijuana cigarette and e-cigarette market share before any of the smaller players can even get a foot in the door.
Disclosure: As of this writing, Wayne Duggan had no positions in any of the stocks mentioned.
